Yes that's more than possible. I have ran various things for people on my internal home servers I have configured however the only barrier you will hit with more than, say, 5 users is bandwidth. Unless you purchase some sort of business line you will run into huge bottlenecks with websites when you host them for multiple customers as if they host large files, images, pages etc and they all get used at the same time, you are going to see your bandwidth get very full on use and with a home Internet connection you are going to notice very slow speeds in comparison to a proper webhost provider. Slow speeds = customers leaving.
Also, what you have to bare in mind is that when you dedicate a server / servers to providing such a service, you limit yourself to how much you can use your own home Internet. Downloading is out the window once you start a business like this ran from your own home as if you clog up your own Internet connection with downloads, you basically give no bandwidth at all to the websites so when people visit them, they take AGES to load due to it. So to stop this from happening, you need to use your Internet as little as possible.
Very silly idea in my opinion. Running such a thing from your own home. It would be smarter just to purchase your own dedi server in a proper data centre and rent out spaces of it to people wanting to host a website. At least you would have absolutely NO issues what so ever in that sense. Also what you have to bare in mind is that you need to be around pretty much 24/7 to make sure it's constantly running. And if any faults happen, that you can sort them within an hour or two MAX. Then you have to think of power consumption at home as leaving that many servers on will use up a fair amount of power.
In short, yes it will work, but it's a very silly approach to go about becoming a webhost when doing it properly doesn't cost much more and works out better and cheaper in the long run.
Breaks.